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INCOME TAXES (Tables)

12 Months Ended

Oct. 28, 2018

INCOME TAXES

Tax Reform Measurement Period Adjustments and Effects on Results

The income tax expense (benefit) for the net deferred tax asset remeasurement and the repatriation tax in 2018 in millions of dollars follow:

		Equipment			Financial
		Operations			Services			Total
Net deferred tax asset remeasurement		$	768		$	(354)		$	414
Deemed earnings repatriation tax			277			13			290
Total discrete tax expense (benefit)		$	1,045		$	(341)		$	704

Provision for Income Taxes by Taxing Jurisdiction and by Significant Component

The provision for income taxes by taxing jurisdiction and by significant component consisted of the following in millions of dollars:

		2018			2017			2016
Current:
U.S.:
Federal		$	(268)		$	360		$	51
State			123			48			26
Foreign			392			463			340
Total current			247			871			417
Deferred:
U.S.:
Federal			1,233			59			297
State			(40)			7			11
Foreign			287			34			(25)
Total deferred			1,480			100			283
Provision for income taxes		$	1,727		$	971		$	700

Comparison of Statutory and Effective Income Tax Provision

A comparison of the statutory and effective income tax provision and reasons for related differences in millions of dollars follow:

		2018			2017			2016
U.S. federal income tax provision at the U.S. statutory rate (2018 - 23.3 percent, 2017 and 2016 - 35 percent)		$	950		$	1,104		$	778
Increase (decrease) resulting from:
Net deferred tax asset remeasurement			414
Deemed earnings repatriation tax			290
Other effects of tax reform			42
Differences in taxability of foreign earnings			(92)			(83)			(107)
Valuation allowance on deferred taxes			50			89			79
Research and business tax credits			(43)			(63)			(57)
State and local income taxes, net of federal income tax benefit			59			37			26
Excess tax benefits on equity compensation			(49)			(30)
Tax rates on foreign earnings			44			(84)			(27)
Unrecognized tax benefits			30			9			11
Nondeductible impairment charges									4
Other - net			32			(8)			(7)
Provision for income taxes		$	1,727		$	971		$	700

Analysis of the Deferred Income Tax Assets and Liabilities

An analysis of the deferred income tax assets and liabilities at October 28, 2018 and October 29, 2017 in millions of dollars follows:

		2018						2017
		Deferred			Deferred			Deferred			Deferred
		Tax			Tax			Tax			Tax
		Assets			Liabilities			Assets			Liabilities
OPEB liabilities		$	984					$	2,011
Lease transactions					$	850					$	933
Tax loss and tax credit carryforwards			713						677
Accrual for sales allowances			464						680
Tax over book depreciation						357						569
Goodwill and other intangible assets						458						130
Pension liability - net			45						420
Allowance for credit losses			115						107
Accrual for employee benefits			72						141
Share-based compensation			58						116
Deferred compensation			35						59
Undistributed foreign earnings						6						21
Foreign unrealized losses			10						7
Other items			346			261			432			172
Less valuation allowances			(658)						(620)
Deferred income tax assets and liabilities		$	2,184		$	1,932		$	4,030		$	1,825

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the total amounts of unrecognized tax benefits at October 28, 2018, October 29, 2017, and October 30, 2016 in millions of dollars follows:

		2018			2017			2016
Beginning of year balance		$	221		$	198		$	229
Increases to tax positions taken during the current year			36			35			14
Increases to tax positions taken during prior years			62			13			11
Decreases to tax positions taken during prior years			(39)			(17)			(36)
Decreases due to lapse of statute of limitations			(15)			(11)			(7)
Acquisitions*			31
Settlements			(5)			(1)			(5)
Foreign exchange			(12)			4			(8)
End of year balance		$	279		$	221		$	198

*       See Note 4.

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